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Feb 26 - 08:55 PM

GBP/USD - COMMENT-A Potentially Volatile Period For Sterling

By Andrew M Spencer  —  Feb 26 - 07:50 PM

Sterling could be volatile as the Brexit end-game approaches.
Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen will announce a new Brexit deal for Northern Ireland on Monday, if they can agree final details during lunchtime talks in Britain.

If an agreement is announced, the reaction of the pro-British Democratic Unionist Party (DUP), and Eurosceptics within the ruling UK Conservative Party will be key to the deal's success and possibly the future of PM Sunak.

A deal that is accepted by all sides would be strongly positive for sterling, enabling much smoother access to markets in Europe, the UK's biggest customer.
From a European perspective, it would also enhance trade at a time of economic turmoil.

Rejection of a deal by the DUP would undermine Sunak's credibility, and probably lead to a major setback in negotiations, and the UK-EU economic relationship.

Thus there is a significant chance of volatility in sterling, and to a lesser extent, the euro.

Technically GBP/USD heads into the potential deal trending lower against a broadly stronger U.S. dollar, based on their disparate economic outlooks.

News that a deal has been reached, and agreed by the DUP, would see sterling jump.
Key resistance starts at 1.2101, the 21-day moving average which capped in February, then last week's 1.2147 top, and the Feb 14 1.2269 high.

No deal, or a deal accompanied by dissent from the DUP, would likely test the 1.1842 2023 base, with the next significant support at 1.1637, 38.2% of the 2022-2023 rise.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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